Dow Slips 1.78 in Uneasiness Over Economy : Market Overview

Blue chip stocks slipped Friday as uncertainty over the economy and Washington’s economic policy muted investors’ enthusiasm. The Dow Jones industrial average ended down 1.78 at 3,267.67, after earlier climbing 23 points. For the week, it was off 12.52.

In the bond market, Treasury prices rose as investors sensed a buying opportunity and traders began to believe that the economic upturn may be losing steam. The yield on the Treasury’s key 30-year bond, which moves in the opposite direction from price, fell to 7.79% from 7.84% late Thursday.

Stocks

Traders said buying was spotty because of economic uncertainty. Auto stocks gained, but other cyclicals--stocks expected to gain in an economic recovery--were mixed. Some growth stocks slumped.

In the broader market, declining issues held a slight edge on advances in the daily tally at the New York Stock Exchange.

Big Board volume came to 221.11 million shares, up from 215.12 million Thursday.

“Overall, I think the market will continue to favor the cyclicals,” said Peter Canelo, chief investment strategist at County NatWest. “The combination of growing money supply and rising industrial prices means there is a recovery out there.”

* The Big Three auto makers rose after Merrill Lynch upgraded its intermediate-term ratings on the companies. General Motors rose 1 3/8 to 37 1/2, Chrysler added 3/4 to 17, and Ford rose 1 to 36 3/4. Goodyear rose 3 1/4 to 64 3/8.

Among the market highlights:

* Komag Inc. dropped 3 to 14 7/8 after it reported lower-than-expected fourth-quarter earnings and at least two analysts slashed their 1992 earnings estimates.

* McDonnell Douglas slumped 2 1/4 to 63 1/2 on investor concerns about the company’s plan to sell a stake in its commercial jetliner business to a Taiwanese firm.

* TakeCare added 4 to 29 after First Boston and Kidder Peabody repeated buy ratings on the stock. The company posted strong fourth-quarter results.

* Au Bon Pain jumped 4 1/8 to to 20 7/8. Smith Barney initiated a buy rating on the company.

* Callaway Golf, an initial public offering, ended at 32 3/8 after being priced at $20 a share.

* Corestates Financial slumped 1 1/8 to 44 1/2. Janney Montgomery cut its rating to hold from buy.

* National Medical fell 1 1/4 to 14 5/8 after it said third-quarter and full-year results would be below expectations.

In overseas trading, stocks ended high in Tokyo and London, but lower in Frankfurt. In Tokyo, the 225-share Nikkei average was up 5.11 points to 21,338.81, a gain of 47 points on the week. London’s Financial Times 100-share average was up 0.1 point at 2,562.1. In Germany, the 30-share DAX average closed at 1,745.13, or 4.77 points below Thursday’s finish.

Credit

The price of the key 30-year bond, which fell 1/32 point Thursday, climbed 5/8 point, or $6.25 per $1,000 in face amount, by closing.

Analysts said the market largely ignored several economic reports released Friday.

Among them, the Commerce Department said the nation’s gross domestic product grew at an annual rate of 0.8% in 1991’s fourth quarter, up from the earlier estimate of 0.3%.

But a large part of the increase came from a buildup in inventories. Higher stockpiles left analysts fearing short-term production cuts to work down the backlog.

In other reports, a group of corporate purchasing managers in Chicago reported their monthly index of economic activity fell in February. But a similar report from Detroit purchasing managers showed a sharp gain.

Kevin Flanagan, a money market economist at Dean Witter Reynolds Inc., said he viewed the revised GDP report as neutral for the economy. He also discounted the two purchasing managers’ reports, saying it was hard to extrapolate for the entire economy.

The federal funds rate, the interest on overnight loans between banks, was quoted at 4.188%, up from 4.125% late Thursday.

Currency

The dollar made modest gains against major foreign currencies in a volatile trading session that lacked any significant market-moving news.

The GDP report was within analysts’ expectations and didn’t have a strong effect on the market, said Jerry Egan, chief foreign exchange dealer for the Bank of Boston.

The dollar jumped quickly against the mark on the report, only to settle back, Egan said. At closing in New York, the dollar closed at 1.639 German marks, up from 1.63545 late Thursday.

The dollar closed at 129.50 Japanese yen, up from 129.00 yen late Thursday.

The British pound fell in New York to $1.758, less expensive than $1.765 late Thursday.

Commodities

Heavier than expected delivery notices hammered wheat futures, while other grains and soybean futures showed gains in active trading Friday on the Chicago Board of Trade.

Deliveries against the March wheat contract totaled 4.26 million bushels, well above expectations of up to 2 million bushels.

The larger-than-expected deliveries prompted traders to sell their positions in the March contract, sending futures plunging, said analyst Pat O’Connell of Refco Inc. in Chicago.

On other markets, livestock and pork futures were mostly higher, precious metals futures declined, and energy futures were mostly lower.

Helping to push wheat prices Energy futures drifted lower in lackluster trading on the New York Mercantile Exchange. Light, sweet crude oil for delivery in April was 7 cents lower at $18.68 a barrel.

On New York’s Commodity Exchange, gold settled 90 cents lower at $353 an ounce, and silver was 0.3 cent lower at $4.10 an ounce.

Market Roundup, D6